Having this mortgage default insurance policy in place allows the lender to fund a mortgage with as little as 5% down payment. Without this insurance protection, the banks would never take on that much risk and you’d need a 20% down payment to purchase a home.
Mortgage default insurance provides insurance to the lender in case you default on your mortgage. You are required to purchase mortgage default insurance if you put down less than 20% for your down payment. When someone refers to an insured mortgage, this is what they are talking about.
The long and short of it is – If your down payment is less than 20% of the purchase price, you will have to purchase mortgage default insurance. Don’t worry, your mortgage broker will explain all of this.
The cost of the policy differs a bit depending on who your insurance was purchased from.
There are 3 insurance companies that provide mortgage default insurance in Canada:
This is an insurance policy that the lender will try to sell you when getting a mortgage. It will pay off your mortgage in case of your death.
Having some sort of life insurance is important if you are a home owner. I would suggest buying a standard life insurance policy from a separate insurance company, rather than mortgage life insurance.
The reasons for this are:
Contact Rachel McLean for a standard life insurance policy.